Last week, Amazon unwrapped a marketplace for Android Applications pitching it as a credible alternative to Google’s own Android Marketplace. This move has generated both excitement and concerns from pundits. There are some who wonder about this move by Amazon and there are others who worry about how the fragmentation of marketplace will affect the developers. The concerns cannot be easily dismissed but I do feel that fragmentation is not a bad thing, per se. I thought I will offer my take on Amazon’s motives with this marketplace move and beyond.

First, some background

Last week’s announcement by Amazon and the opening up of developer portal puts Amazon in the company of other Android marketplaces like Google’s Official Android Market, AppBrain, MobHand, SlideME, AndSpot and GetJar. Even though the developer portal is on, the App store itself will launch only later in the year. A developer can create an account, submit their app and after Amazon reviews and approves the app, it will be added to the Appstore. Amazon will pay developers 70% of the sales price of the app or 20% of the list price (whichever is higher).

Mobile app stores are nothing new. Apple had it ever since iPhone became part of our lives. Android phones and Windows phones also have app stores. The idea of app stores has moved beyond mobile to desktop and web. However, Amazon’s Android app store is slightly different from Apple App Store and Google’s Android Marketplace. It neither takes the Laissez-faire approach of Google nor the tight control approach of Apple where it screens the apps not only for performance and security but also imposes restrictions on the types of applications that are allowed, how they can be architected, etc.. Even though Google’s approach is more developer friendly and more open for innovation, it has other disadvantages like applications delivering bad user experience, malware and virus attacks, privacy issues, etc.. This is clearly a problem that is in need of a solution and Amazon has stepped in to solve this problem.

Amazon will not impose restrictions like Apple. Instead it will test the app to ensure that it works properly as advertised and doesn’t have security vulnerabilities. It will also ensure that user’s privacy is protected in these apps. Essentially, Amazon wants to offer a marketplace of cleaner apps. There is another difference in Amazon’s approach which Jason Kincaid points out in his post. Amazon wants to control the pricing. Developers can set a list price for their apps. Amazon will algorithmically decide the price at different times of the year based on market conditions. If Amazon sells the app closer to the list price or above it, developers get 70% of the sale price. If Amazon sells at a steep discount or offers the app for free on a promotion, developers get 20% of the list price. Amazon app store is not just a clean alternative to Google’s Android marketplace, it will also have other Amazon technologies including their famous recommendation engine. This will make app discovery much easier for users.

What is Amazon’s motivation behind this move?

If you think this is Amazon’s attempt to diversify their business into selling mobile apps, you are grossly mistaken. I see this as a first step towards grand future plans. Some of the possibilities are:

With multi purpose tablets gaining large scale adoption among consumers, single purpose eReaders are slowly losing traction. Amazon might as well have a tablet plan using Android and, if it happens, they will have a well established app store right away.

More than their tablet plans, this app store gives direct relationship with the mobile developers whose business they will want for the Amazon Web Services division. By using smart pricing strategies, Amazon could get many developers to use AWS for their apps.

Even though Amazon cloud services are more popular with startups and smaller organizations than enterprises today, they have a plan for capturing the enterprise market in the coming years. Unlike startups, enterprises are a different kind of beast and Amazon will need a strong presence on all three layers of the cloud, IaaS, PaaS and SaaS. Even though I expect them to go deep on PaaS in the near future, I don’t envision them being a SaaS player. It is not easy to become a multiple app SaaS provider targeting the enterprise market. Instead they can take an app store approach to SaaS (an opinion shared by fellow Clouderati James Urquhart). In future, they could establish an app store for web applications (like Chrome web store) as well as business applications suitable for enterprises. By doing this, they will not only have a SaaS channel but also have a direct relationship with those developers and vendors, which can further help their AWS business. If they go this route in the future, having a popular mobile app marketplace will come very handy.

Gotcha

While deciphering this move by Amazon, it is important to look beyond the usual suspects and think from the point of view of their cloud strategies. Clearly, if they want to beat Google and Microsoft in the cloud game and want to have a stronger presence in the enterprise marketplace, they have to focus on assembling all the moving parts of the cloud stack. With mobile becoming the key component of cloud services now and more in the future, their Android app store has the potential to be more than an app store with some clean applications for consumers. It can easily play into their future cloud strategies. What do you think?

Director, OpenShift Strategy at Red Hat. Founder of Rishidot Research, a research community focused on services world. His focus is on Platform Services, Infrastructure and the role of Open Source in the services era. Krish has been writing @ CloudAve from its inception and had also been part of GigaOm Pro Analyst Group. The opinions expressed here are his own and are neither representative of his employer, Red Hat, nor CloudAve, nor its sponsors.

10 responses to “Deciphering Amazon’s Android App Store Strategy”

I think you are correct in your analysis, but I’d add one more option that is open for Amazon, and that’s serving the markets that Google is neglecting: The Android Market comes at a price: you must abide to Google’s rules in order to get your device accepted in there. And while Google may be doing its best to make it easy, they take care of only 3 markets today: smartphones that look like an iPhone, Tablets that look like an iPad and Google TVs.
There are many other devices that are coming out with Android, but they can’t use the Android Market as Google won’t let them. Amazon can bridge that gap and offer an advanced app store for them.

When you say you expect AWS to go deep on PaaS in the near future (i.e.moving up the stack from IaaS + from SMB to Enterprise) do you envision them gobbling up various APaaS vendors in the Java / .Net space?

Thanks Matt. I expect them to build their own PaaS solution than taking the acquisition route. But we can never say for sure. Some of their advertised jobs makes me feel that they will go this way. Let us see.